【Fujitomi】Nikkei Stock Average: Achieving a momentary advance and retreat

The U.S. stock market closed slightly lower. The S&P 500 index finished at 2,358.84, down 0.16% from the previous close, and the Dow Jones Industrial Average ended at 20,650.21, down 13.01 points (0.06%). The Nasdaq Composite declined 0.28%. As for economic data, the ISM Manufacturing PMI came in negative versus the prior month, giving a slight edge to sellers. Auto makers’ March monthly car sales were weak, which further prompted selling. The final March Markit U.S. Manufacturing PMI was broadly in line with expectations, while February construction spending slightly missed the market’s forecast.

NYMEX WTI futures for May finished 36 cents, or 0.71%, lower at 50.24 per barrel. The restart of production at Libya’s largest Sharara oil field weighed on prices.

In the NY foreign exchange market, the dollar fell against the yen and the euro. Doubts about whether President Trump’s pick for the U.S. Supreme Court would be approved by Congress resurfaced, renewing concerns about policy transparency under the Trump administration. Additionally, a subway bombing in Russia weighed on investor risk-off mood.

The previous day, the Osaka Exchange (OSE) Nikkei 225 futures for June finished the night session at 18,990 yen, down 60 yen from the daytime session. Today’s trading is expected to be choppy for the Nikkei average. U.S. stock declines and a strengthening yen, along with the subway bombing in St. Petersburg, weighed on sentiment, but the start of the new year and supply-demand dynamics may support prices at the downside. Domestically, the Bank of Japan will release the March quarterly outlook for price trends and the monetary base for March; Fast Retailing is scheduled to announce March domestic Uniqlo sales.

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【Positive factors】

・Expectations that BoJ ETF purchases will support supply and demand

・February euro area unemployment rate at its lowest in about eight years

・February euro-area Producer Price Index up 4.5% year-on-year

・Banco de España raises 2017 growth forecast to 2.8%

【Negative factors】

・Trump administration policy uncertainty

・U.S. stock market’s continued small declines and weak U.S. auto sales weigh on sentiment

・Dow Jones falls (20,650.21, -13.01)

・U.S. March auto sales miss expectations, annualized at below 17 million units, signaling a slowdown

・NY foreign exchange market: dollar weaker against yen and euro amid uncertainty over Supreme Court nominee

・European stock markets down amid risk-off mood

・NY crude futures fall on Libya restart (50.24, -0.36)

・Explosion in a Moscow subway station; 10 people killed during Putin’s visit to St. Petersburg

・CME Nikkei 225 futures lag Osaka Exchange by 65 points (18,985)

・Uncertainty ahead of the French presidential election

・Geopolitical risk on the Korean peninsula

・Greece debt crisis re-emerges

・March UK PMI at a four-month low

・S&P downgrades South Africa to junk status

【Other notable points】

・China and Hong Kong (Qingming Festival) are closed

・U.S. bond market: yields fall amid weak auto sales and early second-quarter capital shifts

・U.S. ISM Manufacturing PMI for March at 57.2 (forecast 57.0); prior 57.7

・U.S. February construction spending +0.8% (consensus +1.0%) (previous -1.0%)

・U.S. March Markit Manufacturing PMI final 53.3 (previously announced 53.4)

・NY gold futures rise further on political risk in Europe and the U.S., and reports of explosions in Russia

・VIX fear index at 12.38, little changed from the previous day

・Two rate hikes expected this year; balance sheet roll-off may begin, according to the President of the Federal Reserve Bank of Philadelphia

・New presidential order on U.S. entry restrictions; the Supreme Court is to begin hearings in May

・Trump holds first meeting with the Egyptian president, agreeing to cooperate in the fight against ISIS

・Trump administration delays energy efficiency rules; several states say they will not pursue legal action

・Balance sheet reduction could begin within the year, says President of the Federal Reserve Bank of Philadelphia

・First round of French presidential election shows Le Pen slightly ahead of Macron in polls

《Schedule》

08:50 BoJ - EconomyWatch (Short-term Outlook for Businesses, March survey)

08:50 March Monetary Base

14:00 BoJ CPI (excluding fresh food and energy) for February

10:30 Australia February trade balance

10:45 China Caixin Manufacturing PMI (March)

13:30 Reserve Bank of Australia policy rate decision

14:00 India Manufacturing PMI (March)

16:00 Turkey Consumer Price Index (March)

17:00 Euro Area Manufacturing PMI (revised, March)

17:30 March UK Construction PMI

18:00 February Euro Area Retail Sales

18:15 RBA Governor Lowe speaks

21:30 February U.S. Trade Balance

21:30 February Canada Trade Balance

22:30 Draghi speaks at ECB

23:00 February U.S. Manufacturing new orders

05:30 May 5 – Tarullo speaks at Federal Reserve Board

For market conditions, please refer to Twitter. https://twitter.com/fujitomi_8740